Nice interior (and wide angle lens), too bad when you step outside, it looks like a drab apartment complex.

Eventually, the low end of the market must stabilize and these properties must appreciate.

The weight from the high end market is just now starting to show its impact.  High end and mid point sellers now have a growing incentive to drop the asking price.

This from Mr Mortgage yesterday:

“Defaults on original loan amounts over $750k are surging with total counts higher than total sales in this segment. Supply from foreclosure is about to hit hard in the mid-to-upper end housing market. And remember, foreclosure supply is only one form and account for only about 35% of total supply.”

Unless there are move-up buyers with significant equity, there can be no sustained market rally.

Most of these people have been put in a time machine.  Most of them cannot move, and everyday the number moving into a negative equity position is growing.

It is one of the many reasons that real estate markets do not for “V” bottoms but instead slowly change directions in an elongated “U” shape.

The dataquick median for The OC during the last RE debacle:

$205,000 = Dec 1994
$190,000 = Dec 1995
$195,000 = Dec 1996
$210,000 = Nov 1997  
$229,000 = Nov 1998
$258,000 = Dec 1999
$292,000 = Dec 2000
$322,000 = Dec 2001

Nice photoshopped flames in the fireplace in the second photo.

I liked this observation from Mr. Mortgage:

March New Loan Default Summary

“When we look back at 2009 on December 31st with Champagne bottles in hand, we will reflect upon 2009 as being the ‘year of the mid to upper end house price collapse’.”

what is the rental on something like this?

IR, where do you get the data on the sales history of the property(dates and prices) as well as the HELOC/refinancing info that you post below the description? I would love to have access to that data before talking to a seller/agent so I can determine the psychological price barriers of the seller (e.g. not below purchase price). That data could also help to determine a reasonable purchase price (e.g. 1998 pre-bubble prices plus 5% appreciation per year). Thanks!

I use sitexdata.com. The service is a bit spendy, but you do get access to all the data.

Check out this article from the WSJ today: http://online.wsj.com/article/SB124057365983752607.html

Looks like the word is getting out to the non-distressed sellers in the major newspapers: Get out now or forever hold your peace. Nowhere is “immune” to price drops, especially Irvine!

HOA Provides Water(heating),Gas, Trash, Maintenance,
Pool, Spa, Lighted Tennis, Basketball Courts, Work Out Room and Tot Lot.

Homeowners Association Information
Dues #1: $310.00
Association Pool
Association Tennis Court
Association Trash Paid
Greenbelt
Water Paid

Are you kidding me?  How much does water, gas, and trash cost per month? 50.00? maybe 60.00?  They want each FB to pony up an extra 250.00 to pay for a pool, spa, tennis and basketball courts, workout rooms, and a “tot lot”? 

WTF is a “tot lot” anyway?

What a crock.

I loved this line about owners of high-end homes:

“It’s like the old joke about the man with the million dollar dog (“Well, I haven’t sold him yet!”).”

I noticed the same thing.  I was wondering if it was one of those fake fireplaces.

“Tot lot” is Irvinese for “playground”.

My trash and water in Orange is $100 a month in the winter and $200 a month in the summer on my SFR.

WTF is a “tot lot” anyway?

It’s a small playground area for toddlers with the usual swings, equipment, sand/bark chip filled area, etc.

They have one at my dad’s HOA which is a little west of Salinas, I don’t know how much of his HOA monthly goes towards it.

Those were the days, when young people graduated college, got a job, lived with mom and dad while they saved money and eventually pulled together $100 to buy a place of their own.

This is one of my predictions from 2006, that the number of homes in default will exceed the number actually selling.

I also forecast that at its very worst, in places like Riverside there will be more foreclosure auctions than home sales.  For that to happen, lenders have to be turning down short sales and workouts most of the time, very few discretionary sales will be happening, and the stock of REOs is growing fairly quickly.

That status ends when banks finally drop prices enough to move the homes, rent them out and wait, board them up and take them off the market, donate them, or bulldoze them.

Coming sometime in 2010, a tax code change which allows a bank to donate a house to a charitable institution and deduct the original loan value.  If a bank is actually making a profit, it will make sense when prices are less than about 35% of loan values.

I’m gonna go out on a limb and say that 12/31/09 is too early to see market capitulation by the upper end as they are going to hang on in the anticipation of an economic rebound by next year.  I think that 12/31/10 is more likely.

I predict that we’ll be seeing more cracks emanating from the fault lines this year, but there is still great belief out there that this is a cycle controlled by God and things will magically get better in another year.

In the meantime thease people are going to burn through what little savings that they have and start charging the rest to their credit cards in order to get by.

I think the upper end is entering FEAR and will stay there for the remainder of the year.

funny that james Cramer of NY times had predicted a specific date of June 30 2009 for housing market bottom
http://nymag.com/news/businessfinance/bottomline/49938/

I think you’re just about spot on for The OC.

Though I think the largest drop for Orange County’s high end will happen this year.

That status ends when banks finally drop prices enough to move the homes

You’re right.  I think several large banks would have already done it but they’re concerned about a rapid decline in the comps causing more collateral damage to neighborhoods ... even established older neighborhood in The OC.

If the bank just sold three home in your neighborhood for half the cost your paid 5 years ago, you’re gonna be more likely to “just stop paying, and get the banks attention”.  This is what they fear.  Cascade effect.

It’s a toss up.  If the Option-ARMs implode heavily and the bagholders start walking in great numbers; you may be right. 

I’m hedging my bet that these debtors are going to break their backs to make the higher payments for a little while in the hope that everything will magically get better in a year’s time.

I would quibble with the sinusoidal graph. I really doubt that 12/31/11 we will be nicely on our way into a new boom in house prices. In just 2 years there is 0% downpayment and stated income financing again?

As a concept of cyclical behavior it is ok, but the shape, symmetry and projected dates are misleading, in my opinion.

Yup.  They aren’t so dumb.  Find your knife-catcher soon before they wise up.

Don’t even buy the foreclosure out in the burbs.  Just rent for a couple of years and then get it for 1/2 today’s price.

Hell, you may even be able to buy back your old house as a foreclosure by then after the knife catcher loses his down payment and mails back the keys.

That is awful grammar.  IHB ~ There should be an option were I can correct.

I’m off to Vegas.  Everyone have a great weekend.

The right hand section will be much much flatter than it has been drawn.  I don’t expect prices more than 10% above the 2011-12 bottom until 2015-2017.  Well, hyperinflation could do it, so for real prices, don’t expect more than a 5% rise from 2011-12 until 2017.

There is an explanation which I am starting to like more and more.

The banks are selling the homes in best condition first.

I really doubt that 12/31/11 we will be nicely on our way into a new boom in house prices

Neither do I.  I interpret HOPE stage as the moment when we see the light at the end of the tunnel that the market is beginning to stabilize and prices begin to drop at lower and lower rate.

In just 2 years there is 0% downpayment and stated income financing again?

Not at all.  I say that by 2012 we will see the market begin to stagnate and optimism will begin to grow that we have weathered the storm and that the worst is behind us.

Where we go from there… Who knows.  I believe that the market began its bubble march beginning in 98 and it took us 8 years to reach the height where 2004-2006 saw the most rapid inflation then about a year of stagnation (2007) with slight deflation. 

If you agree that the downward march will be symmetric to the upward march, then 2 years of rapid depreciation (2008 - to 2009) followed by 2-3 more years of less rapid depreciation (2010-1012) and then 2-3 years of slight deflation and stagnation 2012-2015 that makes roughly 8 years up 8 years down.

<B>As a concept of cyclical behavior it is ok, but the shape, symmetry and projected dates are misleading,<B>

I think you are interpreting the stages differently than I am….

Also just because it is modeled as a cycle does not mean that we immediately jump into another mania.  We could go another 20 years before another mania rolls around.  I see the graph as relevant only when the mania rears its ugly head. It has no bearing on the time between two manias.

“...There is a finite number of people with large cash downpayments…”

Be careful here.  This sounds like pure conjecture and it sounds a lot like a realtard argument; e.g. “There are a finite number of Irvine homes.”

I agree with you 100%.  I think that we just look at the graph differently.  I am looking at it in terms of how rapidly the slope of the line is changing at each phase - not as a home value vs time XY plot.

Timewise, the graph is pretty meaningless unless you can look back in time to derive where things began.  I say it began in 98 and reached peak end of 2006 which makes about 8 to 8.5 years from left to center.  So if we assume that the downward march will be symmetric and figure it takes 8 to 8.5 years that puts us at the very end by 2014-2015.

finite? or infinite?

This sounds like pure conjecture and it sounds a lot like a realtard argument

Not necessarily.  The reality of the situation is that the majority of people bringing a 500K down payment to the table are using bubble-generated wealth (the proceeds from selling a prior house to a knife catcher one rung down on the property ladder/pyramid).  Sure, you might have a windfall inheritance here and there, but that’s the exception rather than the rule.

This money is eventually going to dry up as values at the lower end fall and financial voodoo remainds non-existant.  No working man is going to save up that kind of cash using his job income - at least not to buy a house in Irvine that is….

Dead on.  My in laws are selling in south county and they’re teetering on Denial headed towards Fear.  I hope they enter Panic when I give them a little Come-To-God analysis this weekend.  In Seattle my parents are entering the Fear stage.

One of my favorite quotes I keep hearing is, “We’re not just going to give our house away!”  Meanwhile they’d still be making $900k on their ‘97 purchase if they “gave it away” now.

He is one of those FHA “White Knight” believers. 

He also fails to address how home prices will remain stable while the banks sit on a pile of REO’s and buyers cannot get credit to hang themselves with….

I would not take advice from this man.

Is this the same Jim Cramer Charlatan whom Jon Stewart called out last month and turned into a laughing stock?

http://www.huffingtonpost.com/2009/03/10/jon-stewart-slams-jim-cra_n_173738.html

I dunno.  In Riverside (as elsewhere), the low-end REO market is white hot, provided the price is right and the property isn’t fatally flawed (by a freeway, major fixer, bad neighborhood).

Are those association fees $300 per month or year? Having never owned a condo, what in God’s name does the complex do with $300/month? Mow the lawns?

...and your gas,maintenance,pool,spa,lighted tennis,basketball courts, workout room and playground ?

At least it isn’t $1,100 a month like the “North Korean Towers of Death”.

Nicely staged and decorated apartment.

Craptastic building.

Asset bubbles typically unwind faster than they grow.  Interestingly, bubbles rarely reoccur in the same asset soon afterward.  It takes a while for expectations to adjust.

Hint:  If it’s been on the market for a few months and you haven’t gotten any offers near asking price, you’re NOT giving it away.

If the volume of foreclosures is high and rising, you can have more foreclosure auctions than regular sales + short sales + REO sales. 

If banks offer very significant discounts at the foreclosure auctions, they might not have as many REOs.  Still, many people would much rather pay the same price for a REO as at the auction.  With a REO, you generally can inspect the house, and the resident/tenant will be gone.  Financing is easier too.

As prices decline, more and more renters and people who live with their parents have enough money.

If you get to a Detroit situation, people with $50k have a lot of choices and can pay cash.  Coming soon to the high desert.

It seems high, but do consider when water and gas are all you can eat, people have a way of wasting them, adding some to the cost.

Also, factor in insurance and replacement reserves. Anyone that has owned a condo knows that termite tenting-free, jack hammering the foundation to fix plumbing-free, replacing walls due to water damage-free. These all happened to me and make the $260 a month I pay less painful.

My guess is the high HOA’s are due to the age of the property and that it does include some utilities.

Orangetree is one of the worst parts of Irvine as you can tell by the price point.

BTW, I’m in escrow on my Irvine condo for around ‘04 pricing…I was happy to get that.

“This sounds like pure conjecture and it sounds a lot like a realtard argument”

Really? I don’t think it is a wild conjecture to assume that the larger the downpayment required the smaller the buyer pool is. In fact, if this were not true, everyone would be buying at foreclosure auctions, and there would be no difference between foreclosure auction price and the price in the financing market.

It is also the obvious conclusion that eliminating downpayments entirely—something lenders did during the bubble—makes demand nearly infinite. When there are no borrower qualifications other than breathing, then the only limit to demand is the number of human beings wanting a home.

The whole point is that sales volumes will not get very high, nor will they stay very high when very large downpayments are required. I thought this statement so obvious as not to need further clarification.

Home prices up in 6 O.C. ZIP codes

Early April shows most area housing prices down more than 24 percent vs. ‘08

http://tinyurl.com/d95avf

I just rarely read sentences like that on this blog - remarks that call for speculation with no data in support.

Of course logically, it would seem there can’t possibly be too many families that want to live in Irvine, that have six-figure liquid assets on their balance sheets, AND want to “invest” in an Irvine home.  It is a finite number.  How many families?  I don’t know…

I’d have to offer up that I’m seeing it differently here in L.A.

In Hancock Park , you can see where the banks have dumped homes along Highland From Olympic up to Melrose.  Further North and East (Hollywoodish…along the 101), the banks pick the houses right next to the freeway.  In Los Feliz (was living there for a year), I saw NOD’s on nice homes that haven’t sold yet but the few that sold were the “dogs” in the neighborhood.

In Marina Del Rey at the Azurra Condo Complex they push the lower floors out on the market first.

I can’t believe that “toxic” loanowners only bought the worst units in condo complexes or homes on corners of arterial streets.

If the banks put the good ones out first, the bad ones would look really bad by comparison and never sell.

They’ll get to the “goods” soon enough I imagine.  Or perhaps I should start calling banks and ask them what they have in the “back room” for a cash buyer.

That @ $1/psf dues in all the Hi-Rise condos (along with about $.60/psf property taxes) seals their fate…especially when you can rent them at $2-3/psf.

God, it annoys me that the bedroom blinds are tangled!

Good question, since the main business for the company is property development, I am saying “practically infinite.”

Silicon Valley is the next Detroit, and Irvine is not going to be very far behind. Irvine was going to be the new Detroit, up until last year.

Silcon Valley is doing pretty good (relatively speaking) in this recession.  They already had their localized recession in 2000-2001.  They will never be Detroit, IMHO.